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Marketing And Strategy

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Marketing and Strategy

July, 2010

With market liberalisation, increasing consumerism and the entry of more foreign players, Indian markets are exhibiting revolutionary changes. The Indian consumer is rapidly evolving and the market is exposing the consumer to a host of new choices by international brands selling their products at competitive prices.

According to a study by the McKinsey Global Institute (MGI), released in May 2007, India's middle class will swell by more than ten times, from 50 million in 2007 to 583 million people by 2025. By 2025, India will also become the 5th largest consumer market, surpassing Germany, moving up from the 12th position it occupied in 2007.

Moreover, for the fourth time in five years, India has been ranked as the most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney in its eighth annual Global Retail Development Index (GRDI) 2009 published in June 2009.

Rural Market: The Next Big Opportunity

The rural consumer market, which grew 25 per cent in 2008, is expected to reach US$ 425 billion in 2010-11 with 720-790 million customers, according to a white paper prepared by CII-Technopak. According to the study, the rural market is seeing a 15 per cent growth rate.

According to the figures released by market researcher Nielsen, demand for personal care products grew faster in rural than urban areas during the period January-May 2010.

In shampoos, rural demand grew by 10.7 per cent in value terms, while in urban markets, it rose by 6.8 per cent. Similarly, toothpaste sales grew by 9.1 per cent in rural India and by 4.4 per cent in urban markets.

Hindustan Unilever (HUL) is planning to significantly increase its rural reach. Currently, the HUL products reach is approximately 250,000 rural retail outlets and the company intends to scale it up to nearly 750,000 outlets in a span of two years.

Swiss FMCG giant, Nestle plans to make further inroads into the rural markets. The company has asked its sales team to deliver “6,000 new sales points every month in rural areas” to expand presence in Indian villages, according to Antonio Helio Waszyk, Chairman and Managing Director, Nestle India.

Car makers are foraying into rural markets with industry majors reporting 50-100 per cent rise in sales in such regions in 2009-10.

Further, Mahindra & Mahindra (M&M) is now selling more Scorpios in rural and semi-urban markets. The rural footprint for the super utility vehicle (SUV), Scorpio sales have increased from 35 per cent to nearly 50 per cent in the last two years.

Yamaha is planning a major initiative in rural India by launching more models in the affordable price range in 2010. “"We are very strong in Tier 1 and Tier II cities. Now onwards, our focus will be rural India (Tier III towns). We will launch more models in the affordable price range to dominate the rural market," according to Pankaj Dubey, National Business Head, India Yamaha Motor. At present, around 15 per cent of its sales come from the rural market and Dubey sees this demand increasing substantially in 2010.